ADMS4504-Assignment2-Sample1

ADMS4504-Assignment2-Sample1 - AP/ADMS4504A Assignment #2...

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AP/ADMS4504A Assignment #2 Fall 2009 Instructions: (1) This assignment is to be done individually. You must sign and submit the standard cover page supplied as the last page of this assignment . (2) Before you start, please read the note “ Writing Style Required for AP/ADMS4504 Assignments ” posted in the “Assignments” folder on the course web site. Please stick to the writing guidelines suggested in the note. (3) This assignment is due at the start of class , on December 3, 2009 . (4) This assignment is to be either handwritten or printed out. Work that is too difficult to read due to messiness and poor handwriting will receive zero credit. You must show your full work to receive full credit . (5) This assignment carries a total mark of 100 points. (6) Late assignments will not be accepted whether for technical or any other reason. (7) Decimal places: please keep at least 4 in your calculations and 2 in your final answers. Question 1 (Yield volatility and binomial model) (22 marks) This question has the following two independent parts, (a) and (b). (a) Use the daily yields in the table on next page to compute a daily standard deviation of yields. Next annualize the daily standard deviation just calculated first using 365 calendar days, then using 250 trading days in a year. Finally, construct a 10-day moving average equal weight volatility forecast for each day in the period from Day 15 to Day 30, assuming that the expected value of the daily change in yield is zero. Please note: for this question 1) if you use Excel please attach your Excel worksheet to your assignment and 2) keep at least 6 decimal places in both your calculations and your final answers . Please show your calculations. (12 marks)
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AP/ADMS4504A Fall 2009 Assignment #2 Day Yield (%) 0 4.380 1 4.393 2 4.430 3 4.428 4 4.522 5 4.648 6 4.656 7 4.595 8 4.562 9 5.208 10 4.454 11 4.404 12 4.659 13 4.904 14 4.820 15 3.933 16 4.907 17 4.650 18 4.814 19 4.766 20 4.692 21 4.687 22 4.521 23 4.435 24 4.424 25 4.440 26 4.516 27 4.448 28 4.427 29 4.390 30 4.457 Page 2
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ADMS4504-Assignment2-Sample1 - AP/ADMS4504A Assignment #2...

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